Congress is tackling the GM and Ford bail-out plea in the right way

Congressional leaders have taken an encouraging step in deliberating whether
to bail out Detroit’s carmakers with taxpayers’ cash.

They weren’t cowed into submission by the Big Three’s prophesies of doom at hearings and in newspaper adverts this week. Nor did they simply hang Motown out to dry.

Instead, they’re offering the carmakers a second chance to make their case: if Chrysler, Ford and General Motors are to have any chance of getting an emergency infusion of cash from the federal government, they must first submit a detailed plan by the beginning of December outlining how much money they need and why, and how they intend to return to profitability.

Motown’s bosses shouldn’t be surprised. At times they were too cagey in their responses to questions from the House and Senate committees this week. Ford chief Alan Mulally refused to estimate how much cash his firm might burn through next year. And while they all claimed the $25bn they were asking for was just a bridge loan to get over the worst of the credit crisis, none of them would promise not to come cap in hand for more.

Even worse from a public relations perspective, in a stunning display of profligacy the three chiefs each flew to the hearings on expensive company jets – despite being there to plead poverty.

True, a bipartisan group of senators pushed for a vote on a plan to allow car makers broader discretion to use $25bn of federal loans already approved to fund the development of greener vehicles. But that, too, was tied to Detroit’s manufacturers proving they were good for it.

And some lawmakers expressed sympathy with the argument that a car manufacturer’s bankruptcy filing would quickly degenerate into a liquidation, hurting the broader economy.

But that wasn’t enough to convince them to loosen the purse strings. Motown’s shock tactics did, at least, get them noticed. But at present Congress seems determined to link a bailout to a significant restructuring of the manufacturers’ businesses. That’s a good sign.